Does “Digital Fragmentation” Pose Threats to Business Innovation?

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A new report from Accenture outlines four steps companies can take to align cross-border use of technology innovations with national policies.

Digital fragmentation — defined as the rise in restrictions on the free flow of data and IT products, talent and services across country borders — is rising, warns a new report from Accenture. The report, “Digital Fragmentation: Adapt to Succeed in a Fragmented World,” says that well-meaning national policies are to blame that that governments and companies need greater collaboration to stimulate rather than inhibit the use of new technologies.

According to the report, 74% of the over 400 CIOs and CTOs surveyed said they expect to exit a geographic market, delay entry plans or abandon them altogether within the next three years due to increased obstacles to globalization. The number of restrictive trade measures adopted by G20 members rose sharply from 324 in 2010 to 1,263 in 2016, and the number of countries with privacy laws jumped from 34 in 1995 to over 100 in 2015.

Over 50% of the professionals surveyed said they believed the increasing barriers to globalization will hinder their ability to use or offer cloud-based services. 54% said those barriers would hinder their ability to offer or use data analytics services and 58% said they would make it impossible to operate effectively across different national IT standards.

“Moves against globalization are forcing companies to make fundamental changes to key strategic and operational plans across global IT architectures, the recruitment of IT talent, the physical location of IT and cybersecurity,” said Omar Abbosh, Accenture’s chief strategy officer. “Regulation can provide critical safeguards in the digital economy. But it should be designed to stimulate, rather than inhibit, growth and innovation. Stronger dialogue between business and government is required.”

91% of the respondents said they expect those barriers to increase their IT costs as well.  The most affected areas include talent, infrastructure, and compliance.

The report outlined four steps companies can take to align cross-border use of technology innovations with national policies:

  • Add a new lens to the strategic process: Dedicate greater resources to reviewing the business impact and responses. For instance, should the company reallocate investments and global functions differently across markets and jurisdictions?
  • Map and de-risk data flows. Protect flows of information critical to management decisions and business operations. Assess how data regulations such as national cross-border restrictions and requirements will affect business models. Re-evaluate where and how to maintain different types of data – which could mean trade-offs between security and ease of accessibility.
  • Build local advantage: Striking the right balance between centralization and local investment is vital. Organizations must become part of the fabric of the local economy within their key markets; this includes the development of local talent and the cultivation of relationships with local technology partners and policymakers. The right degree of centralization of IT strategies, processes and infrastructure across markets must also be assessed.
  • Use technology as part of the solution: Technologies offer solutions. For example, 3D printing can help manage global manufacturing activity more flexibly. Artificial intelligence can help address restrictions on talent migration. And blockchain technology can provide more secure, decentralized and distributed systems for data protection and cybersecurity risks.
Sue Walsh

About Sue Walsh

Sue Walsh is a freelance writer and social media manager living in New York City. Her specialties include tech, security and e-commerce. You can follow her on Twitter at @girlfridaygeek.

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